The CEO’s Dilemma - How to drive efficient innovation in the organization

The CEO’s Dilemma

How to drive efficient innovation in the organization

Joe Barkai

© IDC Manufacturing Insights

Out of the Recession – It’s All About Innovation

0% 10% 20% 30% 40% 50% 60%

Industry Consolidation

More innovation

Decrease in industry growth rate

Stricter regulation

New competition

Lower risk tolerance

Increase reliance on low cost suppliers

Increased reliance on global sales

Customer shifting to less expensive products / services

Increased reliance on local sales

Increased reliance on local suppliers

Business' inability to get credit

Stricter consumer lending standards

Less innovations

What structural changes do you expect to be affecting your industry in 5 years from now (end of 2014)?

Source: McKinsey Study, 2009n=1549


And We Do…

0

100,000

200,000

300,000

400,000

500,000

600,000

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Filed

Issued

Source: USPTO, 2009Minyuan Zhao, University of Michigan

U.S. Patents

0

10,000

20,000

30,000

40,000

50,000

60,000

1998 1999 2000 2001 2002 2003 2004 2005

Domestic

Foreign

0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Japan

Korea

Germany

Taiwan

Canada

UK

France

China (PRC)

Netherlands

Israel

2007

2006

2005

2004

Foreign Patents Filed in the U.S.

Patents Filed in China


It’s All About Innovation

� Internal R&D spend. Many invest in innovation through acquisitions.

� Size = Revenue FY 08

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

0% 5% 10% 15% 20% 25%

R&D (% Revenue)

Mkt Cap

3Com3MAppleApplied MaterialsBoeingBoston Scientific

CaterpillarCiscoDeere & Co.DellEMCGoogleHPIBMIntelJ&JJuniper Networks

MedtronicMicrosoftOracleQualcommSunTexas Instruments

Source: IDC Manufacturing Insights, 2009

Dell

MSFT

HP

IBMJ&J

Juniper

Cisco

Qualcomm

Apple


0

20

40

60

80

100

120

140

160

180

200

Jul-01

Oct-01

Jan-02

Apr-02

Jul-02

Oct-02

Jan-03

Apr-03

Jul-03

Oct-03

Jan-04

Apr-04

Jul-04

Oct-04

Jan-05

Apr-05

Jul-05

Oct-05

Jan-06

Apr-06

Jul-06

Oct-06

Jan-07

Apr-07

Jul-07

Oct-07

The Tipping Point

Source: Adapted from Sketching User Experience (Buxton, 2007), TechDigest.tv, Yahoo! Finance


Return on Innovation

Waste

Differentiation

Neutralization

Productivity

0%

10%

20%

30%

40%

50%

60%

2007 2008 2009

Yes

No

Not Sure

Source:Business Week, September 2009Geoffrey Moore: Dealing with Darwin


Wasteful InnovationRidicu

lous

Source: USPTO, 2009

US Patent 5,443,036: Method of Exercising a cat

U.S. Patent 6,796,467: Device for quick and easy use of a small size cellular phone

U.S. Patent 6,805,657: Body-connected Bike

U.S Patent 7,475,086 (IBM): Method of automatically removing leading and trailing space characters from data being entered into a database system

U.S Patent 4,555,775 (AT&T Bell Labs): Dynamic generation and overlaying of graphic windows for multiple active program storage areas

The Dot Com Era!U.S. Patent 6,368,227: Method of swinging

on a swing


The CEO’s Dilemma

� Innovation isn’t enough– Apple’s Newton

– Microsoft’s Bob

– Segway

– Gateway

– Your favorite – now defunct – startup

� Boost innovation while maintaining balance and efficiency– Thoughtful vs. reckless innovation

– Disruption vs. continuity

Thinking Circa 1997

� It’s all about disruptive innovation

�Companies feel much more comfortable with sustaining technologies for existing markets

�Companies that do not invest in disruptive technologies fail

�Companies that lead in adopting disruptive technologies are new entrants, not incumbent leaders


The Vitality-Stability Balance

Vitality

High

Low

HighStability

Aggressive

Low

Leaders

Laggards Defensive


The Archetypes

Market

New

Existing

New

Technology

Technology

Innovation• MSFT (Windows)• Toyota (Prius)• Gillette / P&G

Existing

Visionaries

• Apple• RIM• Cisco

Fast

Followers•Autodesk•Teva

Product

Innovation• GE• Salesforce.com• Starbucks

High End Disruption

Low End Disruption


Product Innovation

� Technology barriers going down

� Low cost competitors

� Customer loyalty? What’s that?

75%

80%

85%

90%

95%

100%

6.5 7 7.5 8 8.5 9 9.5

70%

75%

80%

85%

90%

95%

100%

6.5 7 7.5 8 8.5 9 9.5

IT

U.S. Automakers

Source: IDC Manufacturing Insights from JD Powers & Associates Data and other sources

� Products as platforms

�Derivatives

�Value add services


Exploring New Markets

� From globalization to localization to “glocaliziation”

� What’s next?


Reverse Innovation

� New markets as catalysts to expansion in established markets– P&G. Cheaper brands for emerging economies to penetrate

new low-cost segments in the US

– GE Healthcare. ECG for the rural Indian market comes back as a product for emergency room and EMT

� How GE reinvents itself– Segmentation

– Decentralization of innovation

– Getting close to the market (local P&L)

Source: GE Healthcare


� Reuse

� Products as platforms– Multiple product and services derivatives

– Expanded demographics


� Technology leadership through innovation

� M&A

– Technology acquisition & integration

– Foundation and options (50 acquisitions during 1998-2000)

– New market segments (Linksys)

� Products as platforms

– Security

– Telepresence

– VOIP

– NAS

– WiFi Audio Streaming

� Globalization strategy

� Next?

– Mass storage? Content?

– Connected home?

– Cloud services?


Market InnovationCustomer Innovation

Operation Innovation

Technology & ProductInnovation

Growth Maturation Decline End of Life

Purposeful Innovation

Market Extension

Accelerate Time

to Value/Volume

Accelerate Product

Innovation

Accelerate Market

Penetration

Protect Brand & Market Share

Manage End

of Life

Renewal

$$$


Continuous Improvement

Opportunities are Abound

Research Design Make

Amend

Sustain End of Life

Enhance

Minimize

Waste

Maximize for

Performance,

Quality &

Compliance

Maximize

Efficiency &

Productivity;

Quality

Maximize

Service Level

& Value-add

Services

Minimize Costs & Inventory Minimize Time & Costs

Maximize

ReuseMaximize

Compliance

Reapply

Sell

Improve

Segmentation

Maximize

Channel

Efficiency


Voice of Technology

• Innovation

Voice of the Customer

• Customer information

• Market intelligence

Utility

Cost

Voice of the Business• Portfolio planning

Voice of Sustainability• Supply chain• Regulations• Lean

Value Analysis

Collaboration Platform

Balancing and Harmonization


The CEO’s Solution: Lean Innovation

� Align innovation with business strategy

� Innovation for growth– Bolster customer loyalty

– New products vs. new markets

� Role of business disruption

� Leaning innovation– Innovate as necessary

– Reuse as much as possible

– Outsource when appropriate

� Open innovation networks

� Goals and strategies change as a function of lifecycle phases– Product

– Market

– Customer


Thank You

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To learn more

• Best Practices: The Value Engineering Process in Technology-Oriented Value Chains

• Knowledge Management Improving Assets Failure Rate

• Global PLM Study: Implementation Landscape and Investment Priorities

• Global PLM Study: Observations and Lessons Learned

• Asia/Pacific (Excluding Japan) Product Life-Cycle Drivers in the Manufacturing Sector

• Redefining Design for X

• Engineering Change Management — How Manufacturers Manage Product Design Changes

The CEO’s Dilemma - How to drive efficient innovation in the organization

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